Dealing with IRS debt for back taxes can be a daunting and stressful experience. However, it’s essential to understand that you have options for resolving your tax liabilities and reclaiming financial stability. As an Illinois tax attorney, I concentrate in helping individuals navigate through the complexities of tax debt. This blog post explores the various strategies available to you and shed light on the path towards resolving your back tax debt.
Understanding IRS Debt for Back Taxes
IRS back-tax debt refers to unpaid or overdue taxes owed to the Internal Revenue Service (IRS). This can result from underpayment, late filing, or an audit that reveals additional tax liabilities. The consequences of back tax debt can be severe and may include penalties, interest, wage garnishment, bank levies, and potential legal action.
Options for Resolving IRS Debt
Paying the full amount owed is the most straightforward option. If you have the financial means to settle your tax debt in one lump sum, this can bring immediate relief and eliminate any further interest or penalties. It’s crucial to carefully review your financial situation and consider the impact of paying off your tax debt in full.
An IRS installment agreement may be your best bet when paying the full amount upfront is not feasible. An installment agreement allows you to make monthly payments over an extended period. However, it’s important to note that interest and penalties may continue to accrue until the debt is fully paid. Working with a tax attorney can help ensure that the terms of your installment agreement are favorable and manageable.
Offer in Compromise
An offer in compromise (OIC) is a settlement option that allows you to settle your tax debt for less than the total amount owed. This option is available for individuals who demonstrate that they are unable to pay the full debt or would face significant financial hardship by doing so. The OIC process can be complex and requires careful preparation and negotiation. Consulting with a tax attorney experienced in OICs can greatly increase your chances of success.
Currently Not Collectible Status
If you are facing financial hardship and are unable to pay your tax debt, you may qualify for Currently Not Collectible (CNC) status. This status temporarily suspends collection activities by the IRS until your financial situation improves. It’s important to note that interest and penalties may continue to accrue during this period. A tax attorney can help you navigate the CNC application process and protect your rights.
In certain circumstances, bankruptcy may provide relief from back tax debt. Chapter 7 bankruptcy can potentially eliminate tax debt if specific criteria are met, such as the age of the tax debt and the timing of tax filings. Chapter 13 bankruptcy, on the other hand, allows for a repayment plan over a three to five-year period. It’s essential to consult with a tax attorney and a bankruptcy attorney to assess your eligibility and determine the most appropriate course of action.
Resolving IRS tax debt requires careful consideration of your financial situation and an understanding of the available options. Whether you choose to pay in full, set up an installment agreement, pursue an offer in compromise, obtain Currently Not Collectible status, or explore bankruptcy, seeking professional guidance from an experienced Illinois tax attorney like Robert Schaller is crucial.
Remember, each situation is unique, and there is no one-size-fits-all solution. By working with a tax attorney, you can develop a personalized strategy to address your back tax debt, regain control of your finances, and move towards a fresh start.
Don’t let back tax debt burden you any longer. Take action today to explore your options and find a resolution that works for you. Contact attorney Robert Schaller to discuss your case and pave the way towards financial freedom.